THE FARMERS BANK OF APPOMATTOX

CODE OF ETHICS

Statement of Need and Definition

The Board of Directors is aware of the important role that public confidence in the Bank plays inthe Bank's actual condition. Honest and trustworthy conduct is required of all of The Farmers Bank of Appomattox employees and officers. Equally important is the public's perception of the Bank and its management as honest and trustworthy. Any public feeling of impropriety can have serious repercussions on the bank.

This policy along with other bank policies will prevent not only the existence but also the appearance of any conflict of interest or breach of fiduciary responsibility and will formalize the bank's commitment to safe and sound banking operations.

Authority

The Board of Directors is ultimately responsible for establishing specific policies to address potential conflicts of interest for directors, executive officers, officers and employees of the Bank. The authority to implement the policy and related procedures has been assigned to senior management. Any action taken regarding inappropriate insider activities or a breach of the Bank's code of ethics will ultimately be reviewed and acted upon by the entire Board of Directors after considering the facts, the seriousness of the conduct, and any potential breach of trust.

Risk Management

In addressing insider activities, the Board of Directors and senior management must be aware of the potential risks that arise from insider abuse and subsequent market reaction. In establishing a Conflict of Interest Policy, the Board and management has evaluated various related risks; these risks include:

Compliance risk. Maintaining legal compliance with various appropriate regulations as well as compliance with the organization's code of ethics.

Reputation risk. Developing and retaining marketplace confidence in handling customer's financial transactions in an appropriate manner as well as protecting the safety and soundness of the institution.

Transaction risk. Ensuring that the transactions of the bank are properly documented, properly recorded, and appropriately expensed.

Conflicts of Interest

All officers and employees of The Farmers Bank of Appomattox are expected and required to actin a responsible and respectable manner at all times. Further, while acting in their capacities as bank employees, all officers and employees must remain free of outside influence that could result in the loss of objectivity regarding business conducted with customers or business conducted with the Bank.

Disclosure

The Bank's officers and employees will disclose all potential conflicts of interest. Potential conflicts of interest would include, but not be limited to, the following:

Management positions, such as directorships, held at outside organizations.

Related business activities.

Any compensation (including salaries, wages, or gifts) received from outside organizations.

It is the responsibility of each officer and employee to be aware of the appearance of any potential conflict of interest and to remove himself/herself from any compromising position regarding the Bank's relationship with any organization with which he/she may be connected.

Acceptance of Gifts

Bank officers may accept small gifts or other items of value from business associates of the Bank, as long as all such acceptances are properly disclosed if necessary and the dollar value is considered nominal. Gifts valued up to $250 may be accepted without prior approval.

Bank officers may accept the following types of items from individuals doing or seeking to do business with the bank:

Meals, gratuities, amenities, or favors based on obvious family or personal relationships.

Meals, refreshments, travel arrangements, accommodations, or entertainment of reasonable value in the course of a meeting or other bona fide business occasion.

Loans from other financial institutions when made on customary terms for the purpose of financing proper and usual activities. See Regulation O policy for insider lending.

Discounts or rebates on merchandise or services that are available to other similar customers

Gifts of reasonable value related to commonly recognized events or occasions such as a promotion, wedding, retirement, holiday, etc.

Civic, charitable, educational, or religious organizational awards for recognition of service and accomplishment

Other benefits or items of value, when approved, in writing, on a case-by-case basis

Handling Confidential Information

All directors, officers and employees will be responsible for adherence with the following rules dealing with bank information:

Confine all information concerning The Farmers Bank of Appomattox, its customers, its depositors, and its directors and employees to internal bank purposes only. This information is confidential.

Do not use insider information (information of a material nature that may affect the price of stock involved) to purchase, trade, or solicit securities until such time as that information is made available to the general public.

Keep disclosure of confidential information to other bank employees to a minimum, preferably on a need-to-know basis.

Employees are to use all bank property for bank use only. These items are the property of The Farmers Bank of Appomattox.

Internal Controls

Adequate controls must be established and maintained to prevent errors or irregularities in procedure. Although the possibility for error always exists, a sound system of internal controls can help to uncover errors as soon as possible and allow for their timely correction. The board of directors acknowledges that effective management of the bank depends on the receipt of accurate and timely information.

Specific Goals

The specific goals of this section of the policy is to develop systems to:

Establish, amend, and communicate approved policies and procedures

Appropriately segregate functional responsibilities and duties

Ensure a reasonable control of assets, liabilities, income, and expenses through operating and accounting controls

Provide management with comprehensive management reports

Segregation of Duties

All job positions within the Bank have specific responsibilities, reporting lines, and job descriptions detailing financial responsibilities that can influence the accuracy of the Bank's accounting and financial records or employees with access to the Bank's assets.

Proper control mechanisms will govern each position that can influence the accuracy of the bank's accounting and financial records. This will help prevent errors that could affect the recording and transactions or cause some type of material irregularities from going undetected.

It is recognized that due to the small number of employees at the Bank that segregation of duties is sometimes difficult due to illnesses, vacations, etc. Management and internal audit should be cognizant of this problem and take the problem into consideration when managing and auditing each area of the bank.

Required Vacation or Absence from Duties

All officers and employees of The Farmers Bank of Appomattox are required to be absent from their job duties for a least five (5) consecutive banking days. This is for audit and regulatory purposes.

Cash and Cash Items

No checks may be drawn on uncollected funds without officer approval. An officer may approve an overdraft only after the creditworthiness of the depositor is evaluated. An overdraft report will be prepared daily; an officer, with loan authority, will review this report daily for old, large, or inappropriate overdrafts.

Over and short account will be maintained for individuals with a cash drawer. Records of all overages and shortages will be maintained, identifying the person involved. A monthly report shall be provided to the President, Branch Administrator and Branch Managers.

No employee of the Bank may use the liquid assets of the bank for personal use. No officer, director, or employee of the bank may use the bank's assets as compensating balances or collateral for personal loans.

All cash items will be appropriately recorded and reviewed on an ongoing basis.

Fixed Assets

The Bank will maintain a detailed record of all its fixed assets. Invoices will be retained in support of all additions to fixed assets accounts. Depreciation schedules supporting each asset will be retained for the life of the asset. Depreciation and amortization expenses will be charged to the books monthly.

Other Areas of the Bank

Note that separate policies exist that cover controls and responsibilities for the following areas in the bank:

Lending

Official Checks

Wire Transfers

Data Processing

Investments and Securities

OREO

Deposit Accounts

Internal Audit

The Bank's internal audit firm will follow the bank's approved internal audit policy and procedures. The firm will report directly to the Board of Directors, through the Audit Committee.

Internal audit reports will be submitted to the audit committee, which in return reports to the Board of Directors. The audit reports will include suggested corrective actions for all problems noted during the audit. All problems noted will require a follow-up audit to determine whether adequate corrections have been made.

Political Contributions/External Involvement

The Bank will not make any contributions or expenditures associated to an election, a political office, or a primary election, political convention, or caucus held to select candidates for a political office. This policy applies to all federal, state, and local elections.

Employees are encouraged to participate in activities outside of the bank, including any charitable or political activities.

To ensure the Bank's separation from any political connections, employees are prohibited from soliciting other employees for political contributions.

While the Bank may support selected charitable organizations, employees are prohibited from coercing others into contributing to any organization.

Any employment outside, in addition to employment at The Farmers Bank of Appomattox, must be reported to the employee's immediate supervisor.

Conduct of Insiders

All individuals who are affiliated with the Bank and are considered to be "insiders" - namely, directors, executive officers, and principal shareholders - must ensure that their conduct does not violate rules relating to self-dealing and personal gain. To this end insiders will:

review the restrictions imposed by Regulation O, as applicable to The Farmers Bank of Appomattox, to ensure that all bank business is conducted at "arm's length" and is in compliance with the appropriate rules and regulations

make all decisions regarding the sale or purchase of bank assets or services on the basis of the best interests of the Bank, without regard to the personal interest or influence of any insiders

provide the reporting form, Director's Related Interest to insiders to create an annual report to the Board of Directors regarding business affiliation, financial interests in other banks, and certain bank loans.

there is not to be any trading of bank stock by directors, executive officers, officers or employees of the bank when a black out period is established by the Board of Directors.

Employee Accounts

To facilitate the direct deposit of payroll checks and other services, all employees are encouraged to maintain their bank accounts at The Farmers Bank of Appomattox. In all cases, the rate of interest the Bank pays on employee deposit accounts will not exceed the rate available to all customers. The Bank will assess all applicable account fees, including overdraft charges on all accounts of employees, directors, and shareholders.

Other Related Policies

The following is a list of related bank polices that are required to be read in conjunction with this policy:

Insider Lending - Regulation O

Principals of Privacy

Personnel Policy

Expense Reimbursement

Bank Security

Data Processing Security Policy

Action for Noncompliance With Policy

Any employee can and should report, without fear of reprisal, suspected illegal or unethical activities by others within the organization. Suspected unethical activities should be reported to your supervisor, auditor, or senior management as would be appropriate to the level of the individual or individuals involved. If reported to a supervisor, the supervisor should report to senior management or audit as appropriate. After investigation a report shall be made to the Board of Directors.

All instances of violation of The Bank's Code of Ethic Policy and related policies will be reported to the Board of Directors. After the Board evaluates the situation, Senior Management will take disciplinary action commensurate with the seriousness of the misconduct. Failure to comply with the terms of this policy may result in termination of employment.